We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois. …

Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.

The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor’s staff.

Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states’ residents.

I had heard of this happening in other states, but this is the first mention I’ve heard about it happening in Illinois. Frack. I don’t make thousands of simolians using Amazon links1, but I do make enough to pay for the hosting of this blog.

Beginning July 1, 2011, a retailer having a contract with a person located in this State under which the person, for a commission or other consideration based upon the sale of tangible personal property by the retailer, directly or indirectly refers potential customers to the retailer by a link on the person’s Internet website.

This is widely known as the Amazon Tax. Supporters include the state’s retail merchants. They claim it will raise $150 million a year in revenues. But the Tax Foundation begs to differ…

Word is that Illinois legislators are considering click-through nexus, also known as an “Amazon tax,” pushed by revenue officials who claim that it would raise $150 million a year in revenue. Such laws, nicknamed after their most visible target, require retailers that have contracts with “affiliates”-independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business-to collect the state’s sales tax. They exist in New York, Rhode Island, North Carolina, and Colorado. […]

Illinois’s version is a traditional first-generation “Amazon” tax that targets affiliates. Contrary to the claims of supporters, Amazon taxes do not provide easy revenue. In fact, the nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue. For instance, Rhode Island has seen no additional sales tax revenue from its Amazon tax, and because Amazon reacted by discontinuing its affiliate program, Rhode Islanders are earning less income and paying less income tax. There’s no reason why Illinois wouldn’t suffer the same fate.

What bullshit. Utter bullshit. Amazon isn’t going to pay the tax, and I’m not going to report the income anymore, because there won’t be any. How does this help close the monstrous budget gap in Illinois? It doesn’t.

Bill Status of HB3659 96th General Assembly Full Text Votes View All Actions Printer-Friendly Version

I was going to make this into an info-graphic, but never got around to it. Anyway, here’s the text-only version:

Old system:
1. I see a film I like (or book, or musical instrument, or whatever), write about it, post a link to Amazon’s DVD, partially because they host an image of the DVD cover, partially because I want other people to watch the film too.
2. My aunt in California sees my post, clicks the link, and buys the DVD
3. Amazon (in Seattle) sends her the disc via UPS
4. I get a 3% commission
5. I report this income in my yearly federal and state taxes (and I do)
6. State of IL makes a little bit of tax revenue

New proposed system
1. I see a film I like, write about it.
2. my aunt in CA sees my post, goes to Amazon and looks for the DVD, buys it.
3. Amazon sends her the DVD
4. I get zero commission in IL
5. I don’t have this income to report on my taxes, so I don’t.
6. State of IL gets zero

Why is the proposed system better for the State of IL?

Footnotes:

if you click a link I put up, and purchase an item from Amazon in the same web session, I get around 3-5% of the purchase price as commission [↩]

Nope. If the bill passes and Amazon drops their affiliate program, I no longer collect revenue, and pay tax to IL. People visiting my blog are not solely from IL, so there is no revenue to be gained or lost, except for mine, and indirectly IL. I don’t use my own affiliate links

Old system:
1. I see a film I like (or book, or musical instrument, or whatever), write about it, post a link to Amazon’s DVD, partially because they host an image of the DVD cover, partially because I want other people to watch the film too.
2. My aunt in California sees my post, clicks the link, and buys the DVD
3. Amazon (in Seattle) sends her the disc via UPS
4. I get a 3% commission
5. I report this income in my yearly federal and state taxes (and I do)
6. State of IL makes a little bit of tax revenue

New proposed system
1. I see a film I like, write about it.
2. my aunt in CA sees my post, goes to Amazon and looks for the DVD, buys it.
3. Amazon sends her the DVD
4. I get zero commission in IL
5. I don’t have this income to report on my taxes, so I don’t.
6. State of IL gets zero

Why is the proposed system better for the State of IL? Why aren’t they going after my webhost, Pair.com? They are actually located in PA – maybe the State of IL thinks Pair.com should pay tax on the transaction too?

Thank you for this enlightening post. The points you raise regarding the “Amazon Tax” show true insight into a pressing issue of today. Here’s an alternate perspective on “Amazon Tax” and Business Nexus for your viewing. Enjoy!

Born, raised, and educated, here in Springfield, IL. If the Amazon tax becomes law, Amazon has stated they will drop me as an associate. We will loose %50 of our business sales. I don’t want to leave but I will have no choice.

[…] the Illiniois affiliates program rather than give the state a taste of the tax revenues, as we’ve discussed previously, I stopped posting as many reviews of Things I Discovered That You Might Like Too. Coincidentally, […]